Case Study Housing Decision During Retirement

Case Study Housing Decision During Retirement

A couple is planning to tour the United States in a travel trailer during their first few years of retirement. They are going to sell their current home now and purchase another home when they finish their travels.

An interesting exercise is to determine the optimum time of selling the home: now or when they're ready to buy their replacement home.

If they intend on traveling for more than three years, then, it may be a good decision to sell prior to the sojourn to avoid paying taxes on the gain in their home. IRS allows for a temporary rental of a principal residence while still keeping the $250,000/$500,000 capital gains exclusion intact. A homeowner must own and use a home for three out of the previous five years which means that it could be rented for up to three years, but it would need to be sold and closed before that three-year window expires.

If the travel will be less than three years, there is an option of selling now or later. Using the example below, the homeowner sold the home, paid their expenses and invested the proceeds in a three-year certificate of deposit until the replacement home was purchased.

case study retirement-1.jpg
As an alternative, if the homeowner rented the home, not only would they have income, the home would continue to appreciate and the unpaid balance would go down resulting in larger net proceeds. Based on a 5% appreciation and continued amortization of the mortgage, the net proceeds could easily be $40,000 more.

case study retirement-2.jpg
Obviously, there are a lot of considerations that affect the decision to sell now or later but in an appreciating real estate environment, being without a home for several years could affect the financial position of the owner in the replacement property. It is certainly reasonable to look at various alternatives before making a decision. Call me at (717) 800-1515 to help you look at the different possibilities and talk to your tax professional.


Tamer Gomaa Headshot
Author:
Phone: 717-615-1515
Dated: April 16th 2018
Views: 368
About Tamer: Tamer has been helping his clients with their real estate needs since 2005 and received numerous awa...

Property Search








RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

A Home For Tomorrow - As people near or enter,
Now Is The Time Vacation Home Buying - Now is the Time – Vacation Home
Case Study Housing Decision During Retirement - A couple is planning to tour the
Mortgage Rates Under 4 Percent Really - Most home buyers, especially first

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

RE/MAX Pinnacle
500 Delp Road
Lancaster, PA
717-327-4359


Other Locations